EXHIBIT 99.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD OR TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH NOTE UNDER SUCH ACT OR SUCH
LAWS, OR UNLESS PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH ACT OR SUCH LAWS.
PROMISSORY NOTE
(this "Note")
U.S. $400,000.00 APRIL 10, 1998
FOR VALUE RECEIVED, SOLDER STATION-ONE, INC., a California corporation
(the "Company"), and SS ACQUISITION CORPORATION, a California corporation
(collectively, "Borrower"), each jointly and severally hereby promises to pay to
the order of XXXXXX XXXXXXXX AND XXXXXXX XXXXXXXX ("Holders"), individuals
residing in California, the principal amount of U.S. Four Hundred Thousand
Dollars (U.S. $400,000.00) (the "Principal"), pursuant to the terms and
conditions hereof.
1. Payment of Principal. Subject to the terms and conditions hereof, the
Principal shall be due and payable if, and only if, on the date that is: (i) one
(1) year from the Closing Date (as defined in the Agreement and Plan of
Reorganization dated as of April 10, 1998 among Solder Station-One, Inc.,
Holders, Heartland Technology, Inc. ("Heartland"), and SS Acquisition
Corporation (the "Purchase Agreement")), the Surviving Corporation's (as that
term is defined in the Purchase Agreement) Operating Income (as defined below)
for calendar year 1998 is equal to or exceeds One Million Five Hundred Nine
Thousand Dollars ($1,509,000.00); or (ii) three (3) years from the Closing Date,
the Company's aggregate Operating Income for calendar years 1998, 1999 and 2000
is equal to or greater than Six Million Twenty-Eight Thousand Dollars
($6,028,000.00). If the Company's Operating Income in calendar year 1998 is less
than One Million Five Hundred Nine Thousand Dollars ($1,509,000.00) and the
Company's aggregate Operating Income for calendar years 1998, 1999 and 2000 is
less than Six Million Twenty-Eight Thousand Dollars ($6,028,000.00), then the
Principal shall not become due and payable and this Note shall automatically
terminate. Operating Income shall be calculated using the income and expense
items incurred by Borrower in the ordinary course of business, which for
illustration are the items included on the income statement attached hereto as
Exhibit A, and shall not include any items derived from or resulting from any
future acquisition of a separate business (but shall include items resulting
from acquisitions of equipment to enhance or expand Borrower's business), any
expenses incurred in connection with the Purchase Agreement and the
transactions contemplated thereby, and any management or similar fees which
Heartland may charge to the Company. Borrower may, at any time and from time to
time, without premium or penalty, prepay all or any portion of the outstanding
Principal provided that partial prepayments shall be in the aggregate amount of
not less than Five Thousand Dollars ($5,000.00) or whole multiples in excess
thereof.
3. Payment Methods. All payments of the Principal hereunder shall be payable in
lawful money of the United States of America to Holders at the location
designated from time to time by Holders pursuant to Section 11 hereof in
immediately available funds by wire transfer to a bank account designated in
writing by Holders to Borrower on or within ten (10) days prior to the due date.
If any payment of Principal or interest on this Note shall become due on a
Saturday, Sunday or a bank or legal holiday, such payment shall be made on the
next succeeding business day.
4. Events of Defaults. To the extent that the conditions set forth in Sections
1(i) or 1(ii) are satisfied, the occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Borrower defaults in payment of any Principal or interest accrued
thereon, when due and payable pursuant to the terms hereof and such defaults
continue for a period thirty (30) days thereafter without cure; or
(b) Borrower, pursuant to the United States Bankruptcy Code or any
state or foreign bankruptcy or insolvency law: (1) commences a voluntary case,
consents to the entry of an order for relief against it in an involuntary case
or to the appointment of a trustee, receiver or custodian for all or
substantially all of its assets or makes a general assignment for the benefit of
its creditors; or (2) an involuntary case is commenced against Borrower in a
court of competent jurisdiction and such case is not dismissed within ninety
(90) days; or
(c) Borrower materially defaults in the performance of any other
covenant, term or provision of this Note, or any representation made in this
Note is or becomes untrue, and such default continues for a period of thirty
(30) days after receipt by Borrower of written notice from Holders without cure;
or
(d) Borrower fails to maintain a Debt Service Coverage Ratio (within
the meaning assigned to that term in the Loan and Security Agreement dated April
10, 1998 among LASALLE NATIONAL BANK and Borrower (the "Loan Agreement") of
greater than 1.35:1 or such greater ratio as may be required under any other
loan agreement of the Borrower in effect from time to time; provided that any
such failure causes Borrower's failure to make a payment under this Note when
such payment becomes due; or
(e) The declaration of an "Event of Default" (within the meaning
assigned to that term in the Loan Agreement) or an event of default under any
other loan agreement of the Borrower in effect from time to time, subject in
each case to any applicable grace period; provided that such an Event of Default
under the Loan Agreement or such event of default
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under such other loan agreement causes Borrower's failure to make a payment
under this Note when such payment becomes due or causes such payment to be
disgorged.
(f) Borrower or any creditor or any shareholder of Borrower, pursuant
to Chapter 5 of the California General Corporation Law or any statute
prohibiting distributions to shareholders or fraudulent conveyances, commences
an action against Holder; provided that if such action is commenced against
Holder by a creditor, it shall not constitute a default unless and until
Borrower shall have failed to defend such action or shall have not prevailed in
defending such action.
(g) Borrower fails to perform any of its material obligations under the
Agreement Regarding Payment of Creditors dated April 10, 1998 among Borrower,
Heartland Technology, Inc., Solder Station-One, Inc., Xxxxxx Xxxxxxxx and
Xxxxxxx X. Xxxxxxxx, and a creditor commences an action against Borrower in a
court of competent jurisdiction arising out of such Borrower's non-performance
and Heartland and/or Borrower fails to cure such non-performance within ninety
(90) days after its receipt of written notice of such action; provided that such
action shall not constitute a default unless and until Borrower shall have
failed to defend such action or shall have not prevailed in defending such
action.
5. Consequences of Default. Upon the occurrence of an Event of Default and such
Event of Default continues for thirty (30) days after Borrower's receipt of
written notice without cure, the entire amount then owing on this Note shall, at
the option of, and upon written notice from, Holders and, if not already due and
payable, become immediately due and payable. Upon the occurrence of an Event of
Default specified in Section 4(b), the entire amount then owing on this Note
shall become immediately due and payable without the necessity of any action by
Holders.
6. Nature of Note. Other than the condition set forth in Section 1, this Note is
an absolute and unconditional obligation of Borrower made in connection with the
Purchase Agreement. This Note is an unsecured promissory note to be issued in
favor of Holders by Borrower as referred to in the Purchase Agreement. Except as
otherwise contemplated in this Note, this Note is not subject to any
counterclaims, defenses, or offset now existing or hereafter arising based on
the Purchase Agreement or any Transaction Documents or otherwise.
7. Subordination. Holders acknowledge that this Note is subordinated to the Loan
Agreement pursuant to the Subordination Agreement dated April 10, 1998 among
LaSalle National Bank, Xxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxx (the "Subordination
Agreement"). The parties hereto acknowledge that this Note is guaranteed
pursuant to the terms of the Guaranty dated as of April 10, 1998 between Holders
and Heartland (the "Guaranty"). Holders also acknowledge that the Guaranty is
subordinated to certain notes that Guarantor has made in favor of Xxxxx
XxxXxxxxxx pursuant to the terms of the Guaranty.
8. Waiver. To the extent permitted by law, Borrower hereby waives demand,
presentment, protest and notice of non-payment is hereby waived by Borrower. No
waiver
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of any right or remedy shall be effective unless made in writing and signed by
the waiving party, nor shall a waiver on one or more occasions be construed as a
waiver of any such right or remedy or any other right or remedy on any future
occasion.
9. Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of California, without giving effect to provisions
thereof regarding conflict of laws. Each party hereby consents and submits to
the personal jurisdiction of the United States and state courts of the State of
California, and expressly agrees that the venue for any action arising under
this Note shall be the appropriate United States federal court sitting within
the Central District of California and the state court sitting in Orange County.
Each party hereby irrevocably waives any objection which such party now or
hereafter may have to the laying of venue for any action or proceeding arising
out of or relating to this Note brought in the United States District Court for
the Central District sitting in Orange County or a state court of the State of
California sitting in Orange County and any objection on the grounds that any
such action or proceeding in either of such courts has been brought in an
inconvenient forum. The Borrower and Heartland agree that this Note is made,
delivered and to be performed in Orange County, California.
10. Assignment. Holders may not assign any of its rights hereunder without the
prior written consent of the Borrower. This Note shall be binding and inure to
the benefit of the Borrower, the Holder and their respective successors and
assigns.
11. Amendment and Modification. This Note shall not be amended or modified
without the prior written approval of the parties hereto.
12. Severability. Whenever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Note.
13. Notice. Any notice or other communication (including payment) required or
permitted hereunder shall be in writing and shall be deemed to have been given
upon delivery if personally delivered or upon receipt if deposited in the United
States mail for mailing by registered, certified or express mail with return
receipt requested, postage prepaid, or by an internationally recognized
overnight courier, or by facsimile with confirmation by one of the foregoing
methods to the addresses as follows:
Borrower: Solder Station-One, Inc.
0000 X. Xxxx Xxx Xxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
with a copy to: Heartland Technology, Inc.
000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 0000
0
Xxxxxxx, Xxxxxxxx 60061
Attn: Xxxxxxxx Xxxxxxx,
Vice President & General Counsel
Holders: Xxxxxx Xxxxxxxx
pursuant to written designation provided
upon execution hereof
with a copy to: Stradling, Yocca, Xxxxxxx & Xxxxx P.C.
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxxx X. Xxxxx
Each of the above addressees may change its address for purposes of this Section
by giving the other addressee notice in conformity with this paragraph of such
new address.
14. Covenants.
(a) Affirmative Covenants. So long as the Note shall be outstanding,
the Borrower shall, and will cause each subsidiary to, at all times in good
faith:
(i) assist in carrying out all those terms of the Note;
(ii) cause to be done all things necessary to maintain,
preserve and renew its corporate existence and all material licenses and permits
from government agencies necessary for the conduct of its business except where
the failure to so maintain, preserve or renew would not have a material adverse
effect on its business or financial condition;
(iii) pay and discharge, when payable, all taxes, assessments
and governmental charges imposed upon its properties or upon the income or
profits therefrom (in each before the same become delinquent and before
penalties accrue thereon) and all claims for labor, materials or supplies which
if unpaid might by law become a lien upon any of its property and would have a
material adverse effect on its business and financial conditions, unless and to
the extent that the same are being contested in good faith and by appropriate
proceedings and adequate reserves, determined in accordance with generally
accepted accounting principles, have been set aside on its books with respect
thereto;
(iv) comply with all applicable laws, rules and regulations of
all foreign and domestic governmental and regulatory authorities, the violation
of which would have a material adverse effect upon its businesses or financial
condition;
(v) continue in force, with good and responsible insurance
companies, adequate insurance covering risks of such types and in such amounts
as are customary for other companies engaged in similar lines of business, the
failure to so continue would have a material adverse effect on its business and
financial conditions;
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(vi) maintain a system of accounting established and
administered in accordance with GAAP consistently followed, and set aside on its
books and cause each of its operating Subsidiaries to set aside on its books all
such proper reserves as shall be required by GAAP;
(vii) maintain a Debt Service Coverage Ratio (within the
meaning assigned to that term in the Loan Agreement) of not less than 1.35:1 or
such greater ratio as may be required under any other loan agreement of the
Borrower or a subsidiary in effect from time to time to the extent the failure
to so maintain causes Borrower to fail to make payments under this Note when
such payments become due;
(viii) indemnify, defend and hold harmless Holders for any
claim, demand, obligation, loss, cost, expense, lien or judgment, arising from
the Subordination Agreement except to the extent that either Xxxxxx Xxxxxxxx or
Xxxxxxx Xxxxxxxx' knowing and willful non-compliance with the Subordination
Agreement after specific notice and opportunity to cure within ninety (90) days;
and
(ix) maintain and keep its material properties in good repair,
working order and condition, and from time to time make all necessary or
desirable repairs, renewals and replacements, so that its business may be
properly conducted at all times, all to the extent consistent with ordinary past
practices.
(b) Negative Covenants. Until such time as all principal and interests
under the Note has been paid in full or this Note has been terminated, the
Borrower shall not, and will not permit any subsidiary to, without the prior
written consent of the Founder, which consent will not be unreasonably withheld:
(i) transfer or otherwise convey in any transaction or series
of related transactions all or substantially all of its properties (or any
subsidiary if such conveyance would involve a substantial portion of the assets
of the subsidiary) and assets to any other person, or consolidate with or merge
into any other corporation or entity or permit any corporation or entity to
consolidate with or merge into it, except with or into a wholly-owned subsidiary
or where the successor corporation will immediately thereafter have a net worth
of at least the greater of Five Million Dollars ($5,000,000.00) or the net worth
of Borrower immediately prior to such transaction and expressly assumes the
obligations under this Note; and
(ii) enter into any agreement which prohibits Borrower from
making the payment of the Note.
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Dated as of the date first written above.
SOLDER STATION-ONE, INC.,
a California corporation
By: /s/ Xxxxxx Xxxxxxxx
Its: President
By:
Its:
SS ACQUISITION CORPORATION
By: /s/ Xxxxxxxx Xxxxxxx
Its: Vice President
By: /s/ Xxxx Xxxxxxxxxx
Its: Vice President
ACCEPTED:
/s/ Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
Xxxxxxx Xxxxxxxx
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